Axon Enterprise Inc (AXON) 2003 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the Q4 2003 Taser earnings conference call. (Operator Instructions) Now, I like to turn the call over to your host, Phil Smith, Chairman of the Board.

Sir, over to you.

Thank you and good morning, welcome to the call.

Let me give you few logistical things.

Rick is not here right now.

He is driving feverishly.

If you saw him he was on CNBC Squawk Box.

He did an outstanding job.

He is on his way back.

He will probably join us in some way during the conference call.

In the meantime, I am going to turn the call over to his brother - or to Doug to read the Safe Harbor Act and then he will pass it off to Tom Smith, the President to take up the conference call from there.

Doug.

Thanks Phil.

Certain statements contained in this presentation may be deemed to be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and Taser International intends such forward-looking statements to be subject to the Safe Harbor created by this act.

Such forward-looking statements relate to expected revenue and earnings growth, the company's estimations regarding the size of the target markets, the ability of Taser to successfully penetrate law enforcement market, the growth expectations for existing accounts, the ability of Taser to extend its product sales to private security, military and consumer self-defense market and the company's target business model.

Taser cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by forward-looking statements contained herein.

Such factors include, but are not limited to market acceptance of the company's products, Taser's ability to establish and expand its direct and indirect distribution channels, Taser's ability to attract and retain the endorsement of key opinion leaders in the law enforcement community, the level of product technology and price competition for the company's advanced Taser products.

The degree and rate of growth of the markets in which Taser competes and the company demand for its products, delays in international orders, implementation of manufacturing automation, and other factors detail in the filings with the SEC.

I'm going to turn the call over to Tom Smith.

It's Phil Smith.

I will start of the 2003 review.

Last time we actually started by number of lives speared by law enforcement by using this technology.

Today we thought it might be interesting to actually take a different perspective on this and talk about few stories of lives have been touched and changed by the fact our stock has done so well.

I get a lot of e-mails from Police Officers around the country.

It is heartening to hear that some of them bought the stock when it was obviously quite a bit cheaper.

I had the one comes to mind from Jefferson County, Colorado, this past week, an older deputy that was getting ready to retire had bought 3000 shares of stock a year ago and still had it.

Obviously, as he said he is able to comfortably retire now.

Another one comes to mind is a Mesa Police Officer here, refinanced his home, took the money, put into Taser, and he has now paid off his home and he will comfortably retire.

We are really happy with that.

These are the guys who are making us successful.

There is another one; there was a great article in Seattle, just to give you an example.

We get these everyday.

This is a quote from the Chief of Police of Seattle PD up in Seattle, Washington.

The whole Less Lethal to program has been phenomenal for us, Police Chief Gil Kerlikowske said, noting there were no fatal shootings involving Police Officers in Seattle last year.

That's the first time in 15 years there have been no fatal shootings.

We see that all over the United States because of people using this technology.

So, its a great business to be in.

It is great to see that lot of people are benefiting from the stock and they're the people that basically have made the company successful which are particularly gratifying.

The next thing I like to just touch on is a bit of negative, but let's get it out of the way our front.

I get a lot of call, lot of e-mails about insider sales.

You know, we started this company 11 years ago, we've been in the stock for nine years.

People inside do sell, they will continue to sell.

It's a fact of life, we own a big percentage of the company, and it is just a fact of life.

We don't pay big cash bonuses.

The CEO and the President got $12,500 cash bonus last year, for the year which is over.

You'd have to say that's a pretty meager bonus.

We take our bonuses in stock.

We're owners of the company just like you and we want to keep -- and so you are going to keep selling.

If you are uncomfortable with that, with insider selling, you probably ought to find a different stock.

It's going to continue over the coming years.

I don't see any change nor should there be any change.

Insiders should be able to participate on the outside just much of the outside investors.

So, enough said touching with that, I am going to turn it over to Tom.

Rick just joined us, but he is trying to catch up.

He just got off a traffic jam, getting up from Squawk Box.

So Tom, it's up to you.

OK.

And let's start of with what a great year 2003 was.

Surprise to some of you that didn't believe we are going to be able to do this.

What you see up here on the screen is obviously the thing we are most proud about, which is the top line.

And what you're seeing there is the increase in percentages of - over 2001 and 2002, and the guidance at the beginning of last year, we have stated roughly 13 to 15 million.

So, on the even high side, the guidance that we gave 12 months ago to start the year out with the percentage increase, you'll notice that we beat even that percentage by 63%.

One of the really good things about that also is that, in getting to that $24.5 million figure for the year of 2003, there were no big numbers that came in there.

That was the steady state of the business.

There were no of our large, huge international numbers that we weren't expecting.

What you're seeing there is acceptance of the product in the marketplace.

The growth is continuing and obviously some of you saw the press release talking about having over $7 million in booked orders through the first month of the first year - of this year.

Again showing that we are continuing to see that pace out there in the marketplace, as not as result of one single large customer coming through.

If we go on to the next slide and you look at our financial results by quarter.

You'll notice our sales increase from 2.8 million to 10.8 million, 283% increase.

Our gross profit went from 1.7 million to 7.2 million, a 330% increase and obviously the big one here, the net income increased from 67,000 to 2.8 million in the fourth quarter, a 4000% increase.

So, what we have there is record sales on the quarter of Q4 for 10.8 million, record earnings of 2.8 million and record profitability, which we're obviously very proud of, because we're keeping an eye on our expenses of 26% after tax for the fourth quarter.

Obviously something we are going to keep our eye on and continue to watch as we go forward.

Some of our key performance statistics and what you're seeing here is the guidance; this is the guidance that we updated after the third quarter.

So pretty much as we - in October, we said we are going to do sales of 20 million.

And our actual sales came in at 24.5 million.

Our net income we have reported roughly 2.9 million, the actual number for the year came in at 4.5 million.

And our basic EPS we had given guidance of $1.00 per share, when the actual share came in ended at -- actual earnings came in $1.41 per share.

Let me make a comment on the shares there, those are computed as the average number of shares over the course of the year.

There have been some questions on that, but again, the share counts that we are using of the average number of shares over the course of the year.

And then we get to our diluted EPS which guidance would have said roughly 71 cents per share and our actual again there was $1.07 per share.

Obviously, very happy with those results for the year.

As we move on to our 2003 accomplishments, our annual sales growth, you saw the number earlier, we are looking over 148% increase for the year-over-year.

We had record profitability with net income of 4.5 million; we had $1.41 EPS and basic share count.

We met the warrant redemption on our performance in exceeding that $1 per share and put out a press release calling those warrants which Doug will touch on later in this call.

We also successfully launched two new products, the big one coming out in the end of May was the Taser X26 which is our product, it is 60% smaller, 60% lighter and 5% stronger than the flagship M26, which has just accelerated our growth that you'll see in the fourth quarter.

We also introduced new XB-cartridge, which allows to help increase our effectiveness in the field, especially in the cold weather environments.

It helps with heavier clothing penetration.

Again, our relationship with law enforcement is giving us feedback things they want to see.

And as the introduction of these two products show we are listening to our customers and we're meeting their demands and fulfilling what they are asking for in the marketplace.

Continuing our accomplishments.

We have two strategic partnerships as we're going forward now.

With General Dynamics as result of the purchase of our competitor, we are jointly developing Taser non-lethal land mine.

I think Ricked on the previous call mentioned we pretty much underestimated the size of this potential market.

We are still seeing a huge opportunity there.

It's tied to government spending, but again very good relationship that we have with General Dynamics as we're continuing to expand our base product line on the Powered by Taser concept discussed previously.

We also have strategic relationship with Patel working on our long-range systems that have been funded under the Office of Naval Research grants.

So again, two very strong partnerships that are in place as we continue to look at other partners; as we're going forward, you will see those updated quarterly.

Our intellectual property - we really strengthened our IP position.

Our M26 patent issued at end of October, we touched on that previously.

But I think it takes reiteration to say in 2003 that is really our foundation patent for the Taser itself.

It's really our bedrock out there that in addition to the bedrock patents we have for cartridges.

We are very, very well protected on both the electronics waveform side as well as the delivery system side.

We now have 11 U.S. patents that have been issued to the company.

We've applied for the X26 patent applied that in the U.S. and under the patent cooperation treaty, which will help give us some international coverage.

And we have three other patents we're not going to get into detail on right now that are under file for new technologies that you'll see coming out later this year.

We also acquired our sole competitor this past year.

So, despite new product introductions, acquiring competitor and expanding manufacturing we were able to accomplish all of this and sustain growth and give better than expected numbers in this call to you today.

As we continue on, our law enforcement, let's discuss the U.S. only.

Again, this is only in the U.S., law enforcement market penetration.

We now have over 4300 agencies, which represents almost 24% of U.S. agencies now using our technology and that's on the streets now with 57,000 officers.

Again here we have 24% of the agencies, but 5% of the officers.

Again showing we still have tremendous opportunity with current customers to expand Taser programs as we go forward in 2004 and beyond.

The new markets, with military, we have not only the U.S. military, but foreign military purchasing and using this technology, I received an e-mail this morning from some of our users in Iraq that are testing and using our equipment.

And the comment directly from this particular user said, "Note, the unit comment they love the Taser, these are strong words in this theater."

So again, the users out there in the field are giving feedback that this is a technology that has a place not only with law enforcement, but in the military as well.

The United Kingdom field test began in April of 2003 and the initial field test on M26 will end in April of 2004.

And then at that point they will also continue a test for somewhere between 3 to 6 months on the new X26.

There will be expansion of the program in the UK.

We are still trying to get our hands around what that is.

We should have more information by our next call, but obviously the tests are going very well there.

We've received numerous feedback from the users, as well as the study groups in the United Kingdom that the response to the Taser over there is even better than they expected.

And we do expect to see some, obviously, progress in the United Kingdom this year.

We also had approval in the country of Switzerland who took an opportunity to look at the field test and results that were going on in the U.K. and other countries and adopted the technology countrywide for use.

Now they are just down to budgeting issues and working this into the system.

We expect to see that continue going forward.

I believe both the U.K. and Switzerland and some of our other European users, that as they expand their use that will have an even more tremendous impact worldwide because so many countries are a lot closer to U.K. law than they really are to U.S. law and as they adopt this technology I really do expect that to help us in our international market.

We also expanded our R&D effort this is year by bringing in new Vice President of R&D and doubling engineering department to take on not only requested products but also those future technologies that are three to five years out that are going to help keep us on the cutting edge.

And we do expect to announce new technology in 2004, and obviously you will see that as it comes to fruition later this year.

Now, let's talk about full deployments we've seen.

We had reported this during our last conference call.

What we had was 60% increase of full deployment in Q4 over Q3.

So we went from 318 full deployments at the end of the third quarter to 506 full deployments at end of the fourth quarter, again showing the expansion of existing customers using the product trying to get one on every officer.

If we look at Taser weapon sale, and these are total weapon sales quarter by quarter, you'll notice that from Q3 we went from 8871 weapons out in the field during just that quarter to 11,997 in Q4.

The other interesting note here is that during the second and third quarter you will notice M26 stayed fairly flat, roughly 6600 weapons.

But you'll notice when we went from Q3 to Q4, the number dropped to roughly one third, but that was picked up with the acceptance of the X26.

We knew that was going to come when the X26 was introduced.

We didn't know how quickly it would come.

Obviously you are seeing that impact the quarter here as far as the M26 goes.

But it's again showing that what police ask for and what we build are what they are taking.

You see that increase by nearly 10,000 getting shipped in the fourth quarter.

Let me jump in, this is Rick.

I was personally astounded to see how fast the law enforcement market embraced the new technology.

This is lightning speed if you look at the transition from the M to the X. And I think that just supports again that we really got the product spot-on, for them to adopt it that quickly.

Thanks Rick.

As we continue, lets take a look at cartridge sales, again another one of the trends we watch.

Total number of cartridges we had produced and sold 105,000 during third quarter.

That number went up to 128,000 during the fourth quarter.

And our average went from 12 to 11 while not significantly - statistically significant, excuse me there, we do monitor that trend and we believe that what you are seeing there is a result of the trade-in program from people upgrading from M26 to the X26, as well as the expansion of new orders.

On the previous slide you saw the adoption and acceptance of the X26 increasing up to almost 12,000 units.

So obviously, with the cartridges going up by roughly 22,000 while units went up by a higher percentage, that's why we believe we have seen little drop-off on the ratio but we don't believe we are going to see that trend going forward unless new orders continue to come in at record pace.

As we look at our U.S. law enforcement market penetration, again graphically, at end of 2002 we had roughly 3.2% of the officers and 13% of the agencies available to us in the United States, even at end of 2003, which was a fantastic year for us, we still only have 5.2% of the law enforcement officers and 24% of the departments.

So even while we still have a big percentage of the agencies out there, we still have enormous opportunity with those existing customers to come back and expand the program.

And to put the numbers to that, that's roughly 4320 agencies and 57,518 officers under those percentages.

Our sales accomplishments.

In the United States we had 800 new departments deploying in fourth quarter.

We added 188 new full deployments in Q4, that's a 60% increase over Q3.

We have 966 departments now testing or deploying the X26, which Rick just touched on, is incredible within the first six months of a product introduction to the law enforcement market.

And we now see officers regularly carrying this product on their belt, because it has proven so successful and it's had such a tremendous impact in the law enforcement market.

As we look to international marketplace.

We sold to 40 different countries during 2003.

I think that's a pretty incredible number to jump out there.

That we've had 40 international customers evaluate and now purchase, at least test an operational trial product, to look at a further expansion going forward over the next several years.

We mentioned the field tests ongoing in the United Kingdom and Switzerland, and handful of other large countries that we believe we'll see impact for this year.

We have issued several - many major quotes ranging between 10 and several - you know, tens of thousands of units that we provide and we'll see those come in to the company during 2004.

But when we get into our guidance, we are not including any of those in our guidance this year.

Our guidance is our base business, our bread and butter, it's the blocking and tackling that we are doing that's coming in here.

Obviously the big upside for us is any of the large orders coming to fruition during 2004.

So with that we'll turn this over to Doug Klint to talk about our legal and business development.

Thanks Tom.

On the litigation front there have been no significant developments in pending litigation.

There was one new nuisance lawsuit filed in fourth quarter and we have implemented a risk management program to help contain nuisance claims going forward.

We are on track for our new building.

We have purchased 4.5 acres in Scottsdale for a new 100,000 square foot facility which is on schedule for completion in Q4 2004.

We have fortified our intellectual property portfolio in 2003 with new foundational patents and trademarks that protect the Taser technology.

I want to give fair warning to anybody interested in getting into this market that we are aggressively enforcing patents and trademarks and are vigorously pursuing any and all infringements.

Since we achieved net income in excess of $1 per share, we have declared a redemption of the outstanding stock warrants.

The redemption date is March 30, 2004 and all stock warrant holders should exercise their stock warrants before this date.

After March 30, 2004 the stock warrants will be redeemed for 25 cents per warrant.

Please address any questions to me at doug@taser.com.

I would now like to turn the call over to Kathy Hanrahan our CFO, and Chief Operating Officer.

Good morning.

As you've heard, 2003 was a year of accomplishment, finishing with strong fourth quarter.

Our operating results were equally impressive.

During the fourth quarter we leased an additional 8500 square feet, expanding our operations to a total of 20,000 square feet.

We built and shipped approximately 9800 X26s compared with the 2180 shipped in Q3.

We built 195,000 cartridges compared with 145,000 built in Q3.

And we're now ramping production capacity for 2004 to support up to 82 million.

Keep in mind this is not guidance, but this is our manufacturing expectations.

And finally, we've launched first automation project, due to be complete in the third quarter of this year.

Moving to the financial update.

Quarterly net sales were up 283%, from 2.8 million in the fourth quarter of 2002 to 10.8 million in the fourth quarter of 2003.

In addition we increased sales by 77% over our previous record quarter of 6.1 million.

That was achieved last quarter.

Our gross margins for the quarter improved 7.4% to 67.4.

This is up 10% over the last quarter.

This increase is the result of our higher margin X26 sales coupled with improvements in manufacturing efficiency.

Our year-to-date gross margin also improved 5.4% over 2002, this was the result again of the decline in direct manufacturing expenses, improvements in our product margins, and operating efficiencies.

The graph we are attempting to show is revenue breakdown both in dollars and percent of sales for the year.

On the left you can see the increased deployment of revenues, with most significant increase in operating income.

This supports our model of greater leverage for sales volume.

The graph to right depicts percent of sales expensed in 2003.

During the year 38% of sales was expensed to COGS, 29% to SG&A and 2% to R&D and 31% to operating income.

I also want to make a note here on R&D.

In addition to the 2%, we also expensed 1.1% toward our government-funded research, which shows up in cost of goods sold.

Our quarterly net income increased 4082%, from 67,000 reported in Q4 of last year to 2.8 million in the fourth quarter of this year.

Additionally we improved 160% over prior Q3 record of 1.1 million of net income.

Year-to-date net income increased 2031%, from 209,000 reported for 2002 to 4.5 million for the year ended December 31, 2003.

Our EPS for the fourth quarter were 70 cents per basic share and 56 cents per diluted share, this represents earning performance well in excess of our updated guidance of 42 cents per basic share and double the analyst projection for the quarter.

Our cash balance grew $12.3 million during 2003; this is a result of $4.4 million generated through operations, 12.7 provided by financing activities, netted against investment activity of 4.7 million.

These investments were in land, building, intellectual property and production equipment to take us into our future growth.

On January 31, 2004 our cash reserve was in excess of $18 million.

Let me just chime in, this is Rick.

Those numbers included - last year we purchased our competitor as well for a million dollars, and that was taken care of by the end of January.

So we've invested a lot and still, cash is coming in.

Yeah.

Our DSO's at 12/31 were 43 days, up 8 days due to the 6 million of revenue recognized in December of last year.

Our inventory turns improved to 10.3 turns as of December 31; this is inclusive of raw material and finished good increases for 2004 first quarter projections.

This is probably the best slide to validate 2003 growth.

I'm going to highlight three areas in particular.

Working capital increased 17 million to 22.4 million over the 5.4 reported at December of last year.

Our total assets grew to 23.2 million, to 31.1 million.

And our total equity grew 21.1 million over the last 12 months.

The income statement also clearly identifies the improvement to operating efficiencies in 2003.

On the first column you see our target business model.

Three years ago when we went public we set these as our guidance to get the company to a certain level of performance.

As of 12/31/03 our gross margins were 61.6%, up 5.4% from last year.

Our SG&A was reduced to 28.5% from the 51.2% reported in 2002.

We increased our investment in R&D to 2% from 1.4% expensed last year, and our operating income grew to 31% of sales with net income of 18.2%.

With that I'd like to turn over to Rick.

OK.

For those who saw me this morning on CNBC Squawk Box mixing it up with the hosts on topic of valuation, some of this will sound a bit familiar.

If you look at the chart here, what we've done is we've done a plot of the Taser stock price and the growth in Taser earnings.

And what you'll see is, lo and behold, they are proportional to a degree that is striking.

This is reaffirmation of the efficiencies of markets.

And many of you out there who are on this call probably read the Barron's article this weekend, which on Saturday came out.

It claimed there's no way Taser stock was worth $133 and that people buying it were irrational.

I take great offense at that, not because of the stock valuation, but I don't like people calling my shareholders irrational.

I think you guys are pretty sharp.

You do a pretty damn good job.

Now if you look at the bottom there, what we did is we took a couple basic ratios to show that, you know what?

There are some rational justifications for where we're at and I don't think that we're out of whack at all.

Take the stock price of $150, that seems to be about where we are at this morning.

Take our Q4 basic EPS of 70 cents, if you annualize that we're at a run rate of $2.80 on annual run rate.

That's a PE of 54.

Boom (ph).

Again, We are going to give conservative guidance for the forward-looking year, but there are certainly some scenarios could play out where we could see some significant growth even from Q4.

So forward-looking P to E ratio might be significantly better than that.

Now if we take the diluted EPS, that PE still looks pretty good at 67.

I was out actually this weekend after the Super Bowl.

I saw Apple Computer's ad where they are giving away like 100 million downloads on iTunes.

I thought it was a great idea, so when I looked at Apple's stock, heck, they are trading at 60!

And they ain't grown at 150% a year like we are.

So obviously I think if you take a PEG type of approach, you know, the PE to Growth ratio for those of you who don't use PEG.

It is a way to compare a company's price earnings ratio to its growth.

You basically do is you take the PE on the top and then you divide by the Growth ratio and, for those people who look at this, generally a value, a PEG value of greater than 1.0, says a company is - it's sort of a - not as a good thing, let's say.

And a PEG ratio of less than 1.0 is saying that hey, this company is growing fast enough, it's growing faster than its PE.

Well on this basis if you use the PEG based on our basic Q4 PE with historic revenue growth of 150%, we have 0.36 PEG.

I think that's pretty good!

Now even if you take our forward-looking projections, where we're projecting a 100% growth in the next year, and we believe by the way if that could be sustained for several years.

Even then the PEG ratio is in 0.54.

Again I'm not trying to come out and make justifications or tell the market how to price our stock.

You guys are obviously doing a good job of that.

I am just defending - you guys are rational and anybody who says otherwise just didn't pay any attention or doesn't know how to read an income statement.

OK, let's move on to the next one here and let's talk about 2004 guidance.

As was mentioned last year, we put out guidance of 15 million and we beat it by 67%.

Now I'm going to tell you we didn't see the year back in January.

We had no idea it was going to be as good as it was.

We tried to be conservative.

We felt comfortable with the 15 million number, so we didn't intentionally lowball, what we did is we put out numbers that we felt very comfortable we could hit, and of course it turned out there was a significant amount of upside.

Our look at 2004 is similar.

I'm not saying we're going to knock the ball out of the park on these numbers again.

But what I am telling you is, based on our current business - and heck, anybody can look at our last quarter or even the numbers we put out for January, annualize them, and see that we are at run rate that will support a 100% revenue growth over last year.

And there is significant upside potential on that.

But one of the reasons we don't give a lot of detailed guidance is it's hard to do in this business.

People are investing in us because we are pretty damn good at making non-lethal weapons and marketing non-lethal weapons.

I'm not Jimmy the Greek.

Nobody here is, we don't predict the future and we don't want to have people errantly investing in our company based on our ability to forecast the dynamic growth ahead of us.

So we will give you a ballpark.

We will give you an order of magnitude, and we'll update it throughout the year as things change, hopefully to the positive with big orders coming in, or if we stumble, we will change it as appropriate as well.

But these are numbers we are pretty comfortable with.

That says basically we are going to run around 50 million will be the run rate.

If you look at it, we did about 24.5 sets, that's 49, roughly 50 million is kind of the base case.

People ask me what's our ability to see into the future.

Frankly, we do not have, the only real measurement we have is the number of people on the phones.

We have doubled the number of people on the phones, by the way.

Kathy what is our current employee population total?

We have 153 employees.

A 153 right now.

We have just doubled the number of people on the phones.

We still can't keep up with it.

It's generally a good indication.

What happens is that the phones ring, they ask for quotes over the phone and the purchase orders roll in that day.

I can't remember, I think we processed something like 3500 purchase orders in Q4.

I mean, I can just tell you yesterday, for example, we did $230,000 in orders.

I mean it's just that we run the business on a daily basis, we close the books on a monthly basis and basically, you know, we don't have a lot of view into what is coming other than just the order activity.

Now the big orders that Tom talked about in offshore, they range from as small as 2, 3 million to up to 40 million.

Now I don't think we will get the 40 million ones but we will see some of the bigger orders towards the end of the year.

And Kathy has mentioned we have the capacity in place to build to a production plant of 82 million.

That's not our guidance, but we have the capacity to do it in our current building.

Now when we move to the new building that goes up substantially, more like half a billion dollars.

So obviously we will have plenty of room there.

That right now is the best outlook we have.

So with that let's open it up for questions.

One last comment which is the statistics we had reported before and that was for the fiscal year of 2003 we had processed 9580 orders compared to 5422 during 2002 and our average dollars per order in 2002 was $1815, that only went up to $2553 during 2003.

Again comes back to substantiate what Phil just said, that it's the blocking and tackling in the base business there is solid, its not any one single large order that's coming in and making or breaking us on a quarterly basis.

That's what we're giving you guidance is on the basic bread and butter, it's on the big upside that we still have out there that large orders will be the big upside in 2004.

So, with that, Operator, I believe we are going to be opening this up to Q & A.

[OPERATOR INSTRUCTIONS] Adam Scotch of CRM.

Please proceed.

Hi, guys.

Good job.

Just two questions, first one is on the working capital slide that you guys had up there.

Looks like the DSO's were up a lot, is that a timing kind of end of quarter thing or why are those up so much?

Exactly what happened that the 10.8 million that we have in revenue, 6 million was shipped in December, and the majority of that was collected in January.

OK.

That was also a ramp-up because of again the increase in the production on the X ramping up.

We had Cincinnati come in there at the end of December, so again it was the year-end spending also by the agencies under their budgets.

OK, so lets say for - as we go kind of go out - working capital management in the next quarter what's sort of a more normalized number you think we should sort of model in?

Our target model is 28 days.

But I think what we are going see on going forward is somewhere between 40 and 45 days because we are starting to see a lot of the bigger agencies in there although some have been great payers.

They have taken our 2% discount.

It just depends on the size of the order and how quickly we can get everything shipped out and collected.

OK, so 40 to 45 days kind of going forward?

Right.

OK, and then secondly in trying to figure out what a sort of current fully-diluted shares out, I was wondering do you guys, other than employees obviously, do you guys give out options to - and board members - do you give out options to people who, at maybe you know consultants or potential purchasers at law enforcement agencies, or is there any other option grants outside of the standard employee board member types?

Let me start, we don't bundle options together with products.

We don't give options out to the customer base out there.

We have done some limited options with consultants, some for example, for our Master Instructor Board, which is a board of independent training officers that helps us develop our training.

We had historically evacuant (ph) public we did some options before we had cash versus legal fees but its really diminimous at this point and frankly, its been somewhat expensive when we have done that because with outsiders, we accounting for stock options is particularly onerous.

In fact, even with small number of options we gave out, because the explosive growth in our stock price in Q4, Kathy is showing that me here we had $191,000 of expenses for outside options.

So, on a going-forward basis that's something we're really getting away from doing at all.

Again, it's been pretty diminimous.

Well, actually, Rick has raised a good question.

We're quite concerned and watching the stock option expensing thing that may take place in 2005.

You read the periodicals.

Everybody thinks that's a fait accompli, I hope it's not.

We have set ourselves up not to get caught in that trap.

All of our options would be vested pretty much by the end of 2004.

So, if that does come in the being, we are not going to have something big gigantic P&L hit in 2005.

Maybe the first quarter there is some but that pretty minimal.

Let me step in and say, there are some in 2005, but the majority of our option grants, the majority at least, will be cleaned up by the end of 2004.

So, that if the FASB folks start expensing options, we are prepared for that.

Unfortunately, I would like to point out and I think Taser International is a great case where options work beautifully.

We don't compensate with a lot of cash at the high levels or the medium levels or the low levels.

This company tends to pay low in salary and give people options back in the dark days when things didn't look so good and we've made a lot of millionaires here, and that particularly makes me feel great.

I would invite you guys to come out to our shareholder meeting and meet some of these young people, who have helped us build this company.

OK.

So, if I'm hearing you correctly, the, I guess, what is the number of outside options that you guys have given, you know, let's say in the last fiscal year?

In the last fiscal year, it's less than 5000.

Less than 5000.

And in total, what has the outside option grant been?

I'm going to say, in aggregate, it's about 15,000.

OK.

And like you said they're to, I guess, consultants, but never to, I guess, law enforcement agencies or potential purchasers of the product?

No, about 10,000 of those was for legal counsel, for both during the IPO and in our earlier days just like Rick suggested where we didn't have funding to pay to the legal fees.

The other roughly 5000 are for our training board.

Well, let me just make it clear.

We do not give options to people to buy our product, end of story right there.

OK.

Great.

Thanks a lot, guys.

Good job.

Thank you.

And your next question comes from Brad Ore of Lord Abbott.

Please proceed.

Good morning.

Given the absence of significant international business in the guidance, could you tell us what the international contribution to your '03 results was in terms of, either percentage of sales or percentage of units shipped?

And whether or not that same percentage applied to the January order numbers that you released?

In 2003, our international business was 11.5% or 2.8 million, and during the month of January, I don't believe we had hardly any, just a couple of trickling orders that I don't even think amount to a percent.

OK.

Thanks very much.

Thank you.

Your next question comes from Eric Nuttall of Sprott Capital.

Good morning everyone.

Congratulations on a wonderful quarter.

Had two quick questions for in.

The first pertains to some of the new products coming down the pipe, the X26 and the land mines.

Wondering, if you could talk to potential market size and kind of some data points or time points you might be looking at?

OK.

This is Rick Smith, talking about this one.

Let's start with X26 C. At this point, we do not project in our guidance there will be significant markets for that.

Obviously, if we talk about significant consumer markets that could blow the doors off the year yet again, if we sold a significant number of those.

We are introducing the X26 C for a number of reasons, not the least to which is, part of the reason I started this company is I had two friends shot and killed in a traffic altercation and we got into this business to make non-lethal alternatives for self defense.

So, some of it is, somewhat moralistic, that we felt we needed to offer this, our latest, most powerful technology for self defense for people like my wife who is a realtor.

That will come out in the middle of the year.

We pushed the introduction because the X26 was growing faster than we keep up with in the production standpoint.

We went ahead and announced the X26 C at the consumer electronics show and will start shipments in the middle of the year.

I really don't have a good feel for what's going to happen with it yet.

So, I guess we are going to learn as we go.

Once we get it out there during the second quarter, we will be formulating our marketing plan.

A lot of it is going to be based around our law enforcement instructor base, the professional users that are out there.

We have a lot of Police Officers that want to train consumers because they think it is a great idea.

It makes everybody's job safer.

Police officers shows up to a house where there's a domestic dispute and there's a Taser involved, obviously, everybody is better off than if there was a gun involved.

So, we are not, we don't have a significant amount in our guidance.

I''d say, we will have more to say to this on our next quarterly conference call, which is going to be in the middle of the year, I'd view it as upside.

On the land mine, the Taser land mine.

Now, that is one that we will not just run to production with.

If, generally speaking from our government research, if we see a commercial application, we will put a parallel project in place where we'll develop it and take to market faster than you normally would on government terms.

But on the land mine system, there's really not a private use for that, that's really for the military, which means we're going to have to kind of slow down and follow the normal development protocols for the military, and the timeline I am getting is the fact that yet sometime probably in 2008, unless there is an urgent needs requirement that accelerates it and puts it through faster.

So the way I would look at the land mine systems program, it is long term, its not going to impact the short term but when it hits, it could be very big.

Numbers have been bantered around in the hundreds of thousands of units just for the United States military and I say that casually.

Bantered around, we don't have indication on that.

Other than, there's a lot of interest in it.

And Rick, would it be a licensing model that Taser would kind of receive some possible recurring revenue, or would you be licensing out the technology to General Dynamics or whoever the manufacturer would be?

Yeah, we are not real interested in licensing because we don't get to do much but twiddle our thumbs, we like to be kept busy.

But what we're doing with GD is basically we'll be providing the guts of the system, all the high voltage components.

And basically the Taser land mine is a Taser system packaged in a box, so to speak, in a housing with a sensor, and it shoots out cartridges.

So, all those components, we are going to sell the majority of the guts, which is all the Taser stuff, GD will take that and put a sensor on it, house it in a box, and then it will be loaded with our ammunition.

So, we'll continue to sell ammunition for land mines just like we do for the handheld weapons.

So, our Powered by Taser concept really is more like Intel Inside.

We are interested in selling microprocessors or in this case, Taser power supply systems that use our patented technology, and for those who partner with us, we will give them a license to use our technology to come with the sale of the various subsystems.

But we're not, at this point; we do not have intention to grab just license people.

Realizing that it is still very early with less lethal land mines, are we potentially talking about a product that could even exceed revenue potential of the Tasers?

Absolutely.

Absolutely we are.

That's one that is particularly difficult to prognosticate.

If this thing works, it would not be, you know, its not out of the ordinary for the U.S. military when they acquire a new system to spend in the hundreds of millions of dollars.

And if we're able to give them a non-lethal area denial capability, that's worth a lot.

I mean, we've spent whether is it tens of billions or over 100 billions in Iraq and we have lots of guys in Iraq telling us, man, could have used that capability for protecting some of these ammunition dumps that are being attacked.

We really, particularly, when you are in low intensity conflict, that's where the area denial becomes most important, because you are not taking guys on out in the combat field, they are coming after you on their in time frame trying to hit you where you are weak.

Last quick question and I will let other callers get on.

Since the announcement of the 3-for-1 stock split or stock dividends, we've seen the stock run up quite well, which makes us all very happy.

Is there potential for another possible stock split in the coming months?

We'll continue to monitor.

One thing we don't want to do is get caught up, you know, again as a Chicago guy, I look at stock splits.

Here you are trading $100 bill for five twenties.

It doesn't change the underlying economics, but there are some market dynamic reasons.

We know that it helps institutions for us to have a larger float, more institutions will be able to take holdings based on that, and also for a lot of the police officers, Phil talked about before, where these guys are buying small lots of shares.

It's easier for them if we keep the share price reasonable.

So, I don't think we have a particular target if we continue to perform on the fundamentals of the company and that's driving the stock price, it makes sense we would look at another split, but we have no plans.

That's great.

OK.

That's all the questions I have.

Thanks a lot guys.

I look forward to another record quarter.

Thank you.

And your next question comes from Steve Gish of Roth Capital Partners.

Please proceed, sir.

Good morning.

First of all, Kathy if you could give us what the basic share count should be for the first quarter?

Are you talking about the shares outstanding?

Yes.

It's 4,224,902.

OK.

Last quarter you thought that the fully dilutive effect of all options including that were not fully invested for this year would be around 5.7 million.

Is that correct?

The number is 5.4.

That 5.7 included options available on the pools that were not granted.

The real fully diluted number is 5,367,211.

OK.

What about on the gross margin line, I assume the deferred revenue was included or offset COGS for Q4?

It did, but also in cost goods sold was scrap allowances, and we wrote off all of our obsolescence.

We have a product that we have head out as our inception, the Air Taser.

And at year-end we created an obsolescence reserve in case that product does not sell.

So in total between that and adding $185,000 to product warranty, we just about offset that revenue deferral.

What about in terms of your purchase orders?

Do you have standard price sheet or is pricing, when you're dealing with these law enforcement agencies, dependent upon volume, are you granting discounts?

Also the stock received a lot of attention, you've had a terrific run.

Great profitability this quarter.

Do you feel going forward you can maintain these types of gross margins when you're talking to law enforcement, particularly the Feds?

In other words, are you going to receive any type of margin pressure or are they are going to want concessions because of the success of the company?

No, we are using that money to go right back into R&D to fund future growth products.

We don't do any discounting whether you buy one or hundred thousand, we have a standard price sheet.

We are GSA listed out there and there is no huge percentage discounts or anything in our dealings with the government, either.

We do try to price the product fairly.

The reason you're seeing the explosive growth there is once we get past the break even we have fall-through to bottom line.

But we're taking that money and reinvested it in our R&D and expanding going forward.

But we do have one price sheet with a standard price that - there are no discounts.

Same for international?

Yeah, international is higher because obviously our cost of sales is a little higher internationally as well as the support because it takes quite a bit longer time.

But again, no discounts.

OK and SG&A expense this quarter was up a little bit.

Was that related to the user conference you had in Europe?

A little bit.

We added head count in customer service area, and brought in new VP of R&D.

So obviously we've had to expand SG&A a little bit to deal with the growth.

But obviously nowhere near the amount of growth that came in at the top line.

Let me add, Steve.

If you remember, our model is when we go above break even, which this past year was about a million a month on revenue; we drop 38 cents to bottom-bottom line of every dollar.

In the year 2004 you're going to see the number move up toward 40 cents as we ship more X's.

Kathy wrote off an awful lot of stuff, she just mentioned almost $400,000 got written off in Q4 that offset that revenue deferral.

You're going to see margins frankly, probably improve would be my guess, above 67% that is me talking, not Kathy.

But I think you're going to see, when we go above break even, which will probably be 15 to 18 million, 18 million would probably be the worst case this year, 15 million you can do the math, it's 50 million minus 15 is, what, 35 million times 40-cents is 14 million after tax.

That is my model and I'll bet it is pretty close.

There was a couple of guys out there that have actually forecast, there's one guy named Chester Scott, that's been following the company and he actually picked 70 cents, believe it or not, back in October.

I told him it was too aggressive, but it turns out he was pretty close.

How many user conferences do you have scheduled for '04?

We have two user conferences right now.

One in April, that we'll be hosted in Las Vegas and then we have our international one that'll be some time in the fall.

We haven't selected a date yet.

This is Rick.

On more thing I'd like to add on the pricing issue, what we're seeing is success because of huge volume we are seeing.

The X26 Taser is still priced well below most of the other proprietary systems out there that are anomalies - well there's the FM 303 (ph) launcher which is in the thousand dollar price range.

The Pepper Ball launch system, so I think we are competitively priced.

The real key for us, you know, we know this, being public people are going to see our success and ask about pricing.

That is a very good concern and part of it is we need to build more infrastructure.

We grew faster than we thought.

And so we're going to be investing more in customer service and additional engineering, and then also just making sure we provide superlative customer service, and that's part of what goes with being a premium product like we are.

OK.

Last question.

The issue of options came up earlier.

Plant full-value recognition for Q4.

What would pro forma results be, have you calculated that?

I have not done that yet.

It will be part of our 10-K.

My focus right now is just to make sure that we got all of the earnings, got through the audit and got everything in line to get the 10-K.

We will talk more about that after the K is published, which I think should be in mid-March.

Was there any dramatic shifts in Q4 itself?

And Q3 has got 300,000.

It has been pretty consistent.

Do you expect it to be around that level, or -- ?

Well, the volatility comes into play.

So I don't want to forecast something I haven't worked out yet, Steve.

OK, That's fine.

Thank you.

Your next question comes from Lena Sapina (ph) of Barron's Financial Freedom (ph).

Please proceed.

Hello, I'm an individual shareholder, a happy shareholder since early 2002 when I heard you interviewed on NPR and got interested in the company.

Good to have you on board.

Thank you very much.

I'm very happy.

My question did have to do with the personal Taser.

You did give some information, you don't have any numbers to throw out in terms what you think the size of that market could potentially be?

The numbers become so ridiculous it is better not to throw them out.

Something like 35 million hand-gun-owning households in the United States.

And there is something like 80 million that don't own handguns, and I think we can appeal to both markets.

There are something like 250 million privately owned firearms.

The numbers just become staggering.

Law enforcement represents, of annual small arms sales in the U.S., law enforcement is 0.3% of the market, compared to 98% of the market is private citizens.

So, the available market is on the order of 200 times the size of our existing law enforcement market.

Right.

It could become such a distraction and we don't know that we have the recipe right yet for the consumer market so we're just going to play by ear and see what we can do.

I have a feeling, consumers seeing this and citizens seeing this on police officer's belts.

You can go any where in the city of Phoenix, you'll see the X26 everywhere.

We believe that's going to really help drive sales, we just can't quantify it yet.

I think there's one other thing that is worth mentioning.

We haven't really talked much about the military.

Tom mentioned Iraq.

There is a lot going on in Iraq we can't talk about.

We think - I think we are going to hear the military this year in a fairly big way.

We are already backlogged on X26;

I think it was like 2500 at the end of the year.

We already announced we've booked another 4.8 million in January that was almost all X orders.

So we are running like heck to catch up with the police.

If military lands a couple of big orders in here, we're going to be scrambling to get the stuff built.

So right now we are just staying focused on those two, the police and the military, our two professional markets, if we do a good job with them the consumers will come.

I appreciate that, and I will give you two little anecdotal pieces.

I live in suburb of Indianapolis in Zionsville, Indiana.

Couple of weeks ago on the cover of my local paper, there was a big headline 'Zionsville police force gets four Tasers'.

That's great!

I'm happy about that.

And just for a little levity, my husband is a sixth-degree black belt in Tae kwon do, he's been practicing for 30 years, and I am about to - he's been pushing me to finally get my black belt test, I stopped practicing after my daughter was born.

When the personal Taser came out, well, why do I have to go to class and get my black belt?

I can just get a personal Taser!

That's great.

Thanks, you check it in on www.taser.com.

I will.

You are right on my top of the list there.

Thank you very much.

Thank you so much.

And your next question is from Dick Ryan of Feltl Company (ph).

Please proceed.

Hi, Phil and everybody else.

Can you talk about the nuisance lawsuit you said in the fourth quarter what that entailed, Doug?

Yes, there was a lawsuit filed for a man who claims he was injured during a training session in Maricopa County and he claims he tore a muscle during this training incident.

He was fully supported at the time he was hit and there are some other factors that raise questions about the veracity of the claim but nonetheless, we got filed with this lawsuit.

OK, can you update anything on the peer review that's going on, on the X26 at this point?

No, that study that you are bringing up is done by the military and we are just hopeful that we will get that study out here in the next month or two, that's a big medical study going on where they are looking at the safety.

They should get that published we hope, we don't know if its going to be made public or not and be available to government agencies.

But Rick can talk about it.

Yeah, this is Rick talking.

I have been heavily involved, what he's talking about is the Human Effects Center of Excellence (ph) which is under the jurisdiction of the Department of Defense and has been doing extensive research into Taser medical safety.

I can't really comment about the content at the meetings, though I can tell you, I think its generally been very favorable.

I don't think they're going to publish that document.

I think it's going to be -- I don't know if classified is the right word, but kept for government internal use only.

But the good news is once it comes out, my personal opinion is that that's going to more than clear the way for all the federal agencies and military to have cover that they believe the weapon is safe and has been adequately reviewed, thoroughly reviewed.

But in terms of timing, next couple of months is what I've been told.

Great.

The order that you delivered to the military the 3200, the foreign military, the 3200.

I believe there was just one cartridge per unit.

Have they come back in for another round of cartridge orders?

No, they have not, and it was actually two cartridges per unit and they have not.

I was in that country already in January.

They're very happy with what they've done so far and they are rolling it out slowly but they have not come back for any additional orders although they are under discussion.

Great.

Thank you.

Thanks Dick.

And your next question comes from Andrew Shutnig (ph) with Nutmeg Securities.

Please proceed.

Thank you, you fellows are quite a run this year.

Couple of questions about international, could you repeat what you said in terms of percentage, was that for the fourth quarter for the year, the 11.5%?

That was for the year with 11.5% of sales.

It was a total of 2.8 million out, again our top line was 24.5 and we did 2.8 internationally and in Q1 it was less than 1%.

Had a series of questions I'd like to ask you about the international market opportunity and how you intend to address it.

Whether you could characterize the opportunity in some way between, say government military, private security, and local law enforcement, and what type of resources you will put into place to affect better penetration of the international market opportunity?

Internationally there is about 8 to 10 times the number of law enforcement offices worldwide outside the United States and private security outside of the United States is even larger than domestic and the reason is, in the United States we have the right to bear arms and there are so many officers out there with firearms.

Internationally most of the private security markets and citizens cant get their hands on that type of a weapon system, so the only thing they have are sticks or other types of non-lethals.

So private security is more prevalent outside of the United States, it's a much larger market here.

You're on the wrong question.

He asked how you are going to address it.

The way we are addressing that is using domestic local distributors within each country on an exclusive basis.

So for example in the UK we're working with single distributor that's handling the entire country and the reason we can do that is because those countries order on a singular basis, in other words, the government is making decision for what is going to go in for the entire country where as in the United States we have 18,000 different agencies making a decision.

In the United Kingdom it's really one agency making a decision for the whole country.

Yeah, that raises another question.

About export control to the extent to which of any pending legislation, both domestically and overseas, like the European Union in terms of any export controls or other restrictions on the purchase and use of stun gun equipment?

Yeah, that's a great question.

I can tell you this, everybody that we have been meeting with for the most part in Washington, I shouldn't say everybody, there's always fringe elements, people can see that this weapon dramatically increases human rights.

Amnesty International has been out there making some noise about how this might be used for torture.

It's completely unsubstantiated, and when we've met with government officials, we can show them that the risk of injuries drops by something like 80% to suspects when a Taser is deployed.

And everywhere in the world, police are carrying a baton.

The argument is so overwhelming.

It is just the most basic common sense that we are running into very little, what I would consider real substantial resistance once we get a chance to meet with people.

And once the United Kingdom moves forward, that is having a big impact in other countries.

One of the big orders Tom has been quoting on came about because the police force in that country talked to the police in the UK and heard about the great success they are having with Taser.

Is it a risk?

Sure it is a risk.

Politics is always a risk.

Whether there are concerns?

I mean there on the legitimate concerns about certain countries should we say, that you know, on a known list of the using torture if you will, by the state department and so on and so forth, and there are an export administration act and certain controls.

I'm just wondering, to what extent there is pending legislation that will inhibit your ability to sell?

Well, I think you are talking about the Congressman from San Francisco that's going to put some legislation up to try and ban the export of all these types of items.

It ain't going to get through Congress.

I'm not worried about it.

I mean, obviously, there's always somebody trying to do something like that.

I mean, export control is an issue.

We deal with Department of Commerce.

We've never been turned down, that I'm aware of, on an export license.

There are countries we cannot ship to, Indonesia, Nigeria and those we don't even process a license.

Our government has been pretty straightforward about where we can and where can't ship.

So, yeah, we are not in our forecast, we have no Chinese, no Indonesians and no Nigerians.

No Libyans, either!

No Libyans either.

Or Iranians.

They are clearly the blacklisted countries.

We keep checking with Department of Commerce, you will see they think, we're an a-number one supplier.

We work with them.

We alert them if we see people shipping stuff outside the United States without export licenses.

We have had distributors that buy products here and ship it offshore.

We find out about it, we let the Department of Commerce know.

So, we are basically on their very good list and we work very closely with them.

But you're right it's a political risk.

Any time you are dealing with the government it's a risk.

Will your policy be to always sell in U.S. dollars or will you sell in local currency?

Always U.S. currency.

Always U.S. dollars by wire transfer or irrevocable letter of credit.

Thanks.

Thank you.

And your next question comes from John Stout of Jacks Partners.

Please proceed.

Just curious with the valuation up here.

Why you wouldn't consider doing an offering of like a million shares?

I only had that offer twice yesterday on the phone.

The family owns a big part of this company.

I'd have a hard time going to my wife and my two sons and the other employees that own shares and trying to convince them with us having over 18 million in the bank, 3 million coming from the warrant, we are generating between 1 and $2 million a month this year, probably.

I'd have a hard time justifying to anybody why we would take and dilute anybody.

I mean, I always know the benefits of it, but right now, I've just got to say the company is doing well; we have no need for the cash.

And that we get the offer, honest to God, we had two last night after the close of business, we're just not going to do it.

I think it sends the wrong signal to the market as well.

Right now, we're running - this business is growing organically.

One of the great things about it is it is really the nature of the law enforcement market.

It just takes time to get certain orders.

For example, internationally, we are making great progress, but it just takes time with these big customers.

So, I don't have a place we can deploy that kind of money.

We are come in to sit in our bank accounts.

And from a pure economic standpoint, I think our shareholders might get pissed off and we are just taking their money to sit in a bank account here.

Thank you.

We will take one more question.

And that comes from the line of Trep Token (ph) a Private Investor.

Please proceed.

Hi, new investor of your company here in Cincinnati and I have been very impressed with what I have seen so far.

There was a very nice article about the fact the Cincinnati Police Department purchased a bunch of your products in December and there have been two subsequent articles, the fact they have been used successfully since being delivered.

As a result, a couple of weeks ago, I bought some stock.

The question that I have is, you mentioned earlier that your company has purchased your main competitor.

Do you see any other companies along the horizon that may be developing similar type of technology?

You know, we certainly hear some rumblings out there.

There's always out on the Internet rumors about what people will or won't do.

And that's frankly, one of the reasons Doug made a fairly clear statement earlier today about us defending our intellectual property.

People will try to get into this space.

I think our intellectual property is pretty darn good.

We have got some bedrock patents on the electric stimulating waveforms that we use.

That is the secret sauce that makes this stuff work.

It's going to be difficult for somebody to get around our patents, not impossible.

So, we are focusing that only on building a broad IP portfolio, but making sure that we are servicing our customer base and law enforcement is a very relationship-intense market.

Once you get a relationship with a city of Cincinnati, it's going to take sticks of dynamite to get us out of there.

So, I think we are in a pretty darn good position and we're aware, we're watching the market, we don't see anything credible on the short-term horizon.

We're also tied into the government research community.

I can tell you, they send anybody who wants to get into this business our away to look at as a potential partner.

We have lots of other people that have delivery concepts for how to deliver Taser devices down range, and we have couple other discussions ongoing on potential strategic partnerships.

But we don't see anybody at this point coming out of the blue.

OK and as far as the personal Taser you're looking for delivery or availability of those later in 2004 is that correct?

In July.

And just to elaborate on that, we've been selling to the consumers for the last 10 years, it's not a new focus, let's say.

We're entering a new market there and we'll be putting more of focus on it later this year.

Do you have a price range as far as with the individual units will sell for?

The X26 will sell for $995, almost a $1000.

OK.

Very good thank you so much and keep up the good work.

And just to point out the obvious.

Its not a mass-market item.

We don't feel the technology is ready for mass-markets.

This is a professional-grade version.

It's very similar to police weapon and that we think there is a substantial potential market, but we are not going to Walmart today.

Pretty good.

Great question.

Thank you.

This concludes the question portion of the conference.

I would like to turn it back over to the host for closing remarks.

We appreciate you all being on.

We have been on over an hour.

We appreciate those people that attended and we will try to keep things going and deliver another great quarter in the first quarter.

Thanks very much.